On March 1 the Price of a Commodity Is $1,000

question 19

Multiple Choice

On March 1 the price of a commodity is $1,000 and the December futures price is $1,015.On November 1 the price is $980 and the December futures price is $981.A producer of the commodity entered into a December futures contracts on March 1 to hedge the sale of the commodity on November 1.It closed out its position on November 1.What is the effective price (after taking account of hedging) received by the company for the commodity?

• A) $1,016
• B) $1,001
• C) $981
• D) $1,014

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Definitions:

Checks and Balances

A system in government where different branches are empowered to prevent actions by other branches and are induced to share power, maintaining a balance.

Civil Liberties

Individual rights protected by law from unjust governmental or other interference.

Three-Fifths Compromise

A compromise reached during the 1787 United States Constitutional Convention that counted three out of every five slaves as a person for the purposes of taxation and representation in Congress.

Slave Trade

The historical trade in humans for the purpose of forced labor, including the Transatlantic slave trade where Africans were transported to the Americas.